What you can learn from GTSI's contracting ban

The need for transparency is first and foremost

By David Hubler

Oct 26, 2010

Scott Friedlander voluntarily stepped down today as GTSI president and chief executive officer as part of an agreement for the Small Business Administration to end its ban on the company from doing further government work.

New leadership now begins the process of trying to answer SBA allegations that GTSI fraudulently received contract dollars meant to go to its small-business partners, such as EyakTech, an Alaskan Native Corporation.

Some industry insiders say the episode could provide a lesson for government contractors to tighten their corporate oversight. Others say contractors do a good job of policing themselves and instead are critical of the SBA’s handling of the situation.

“I don’t see this kind of an event having a significant effect on most companies” because they have good processes in place for checking and double-checking for violations, said Warren Suss, president of Suss Consulting.

“My experience is the community is aware of the rules of the road. They’re very literal in the way that they follow them,” he said.

“We always have to be vigilant in regard to complying with the federal practices and upholding ourselves, frankly, to a high ethical standard mainly because we’re working on behalf of the taxpayers,” said Greg Baroni, chairman and CEO of Attain LLP.

Baroni called the GTSI-SBA situation is a teaching moment because it spotlights the importance for management to have complete visibility for all contractual relationships within the company.

“This situation, I think, is instructive because it raises the awareness of the complexities involved in relationships with small businesses, and how the interaction has to play back and forth,” Baroni said.

“We’ve got to make sure that we are holding ourselves up to an incredibly vigilant standard of playing by the rules, and we’re going to hold ourselves accountable when we don’t,” he said.

“There are some out there who have not built those strong checks and balances as well as reinforcing corporate cultures, and those are the ones who should take notice and get their act together,” Suss said.

As for potential fallout, it’s possible the biggest reaction will come from Capitol Hill because “sometimes when these things happen there is an overreaction on the legislative side,” Suss said. “We’re always vulnerable to some political grandstanding after an event like this."

Mark Amtower, president of Amtower & Co. and a Washington Technology contributor, said he believes some companies already are attempting to learn from what has happened to GTSI.

“Those companies that have used sort of sham companies as a front end are definitely trying to figure out what they can do, when they need to do it, and how they can extricate themselves,” he said.

But, he added, “If [SBA is] trying to say they had no clue that there was alleged abuse of the Alaskan Native program, if they think there’s been no other instance of this, they’re either Pollyanna or blind.”

“I don’t that anybody knowledgeable about the market in D.C. was unaware of the Eyak connection with GTSI and the rather unbalanced way it was being used,” Amtower said.

Nevertheless, he added, “this is not a massively widespread issue. It is a problem and it’s a problem not only for Alaskan Native [Corporations]. But there’s been abuse throughout the history of the set-aside programs that SBA has done little to investigate and or stop.”

SBA’s action should make all federal contractors adhere more closely “to the white part of the line as opposed to crossing over the line,” Amtower said.

That advice could apply especially to some new players in the federal contracting space.

The federal sector accounts for about 80 percent of the work Attain is pursuing.

Baroni, an experienced government contracting executive, emailed the following suggestions to help small businesses increase visibility throughout the lifecycle of their contracts by putting in place a number of internal control procedures:

During the pre-award phase, create a deal review board that includes senior leadership to evaluate the terms and conditions, nature of teaming relationships, and financial obligations of each contract and make a “bid”/ “no-bid” decision that determines whether to pursue the opportunity and prepare a proposal.

During the pre-award phase, repeat the evaluation of terms and conditions, nature of teaming, and financial obligations of a contract to make a “submit”/ “no-submit” decision based on your current ability to meet all terms and conditions.

During the post-award phase, ensure quality and manage risk using “pre-flight” and quarterly “in-flight” reviews of the status of a contract.

Baroni said his biggest concern is the already tense environment between the government and the contracting industry as a whole.

“And unfortunately I hate to say this,” he added, “but I believe it will continue to fuel this negative sentiment between the two and create more tension rather than less.”

Reader Comments

Wed, Oct 27, 2010

The Alaskan Native Corporation program stands a perfect example of (hopefully)unintended consequences. Fair is fair. (1) Scrap the program, (2) break up the ANCs, and (3) let qualified ANSBs compete with the rest of us small business acronyms.

Wed, Oct 27, 2010
Luis
Rockville, MD

One thing we learned is the government is not serious and sanctions are a joke. How many companies have been suspended with all the horns and whistle to be rescinded within a month. Remember SAIC? Contacting officers are merely promoted and old not to do it again
If they make it for real people will think twice about breaking the rules and cheating.

Wed, Oct 27, 2010

The ANC landscape is abused by Federal Agencies who elect to give them sole source contracts worth in the hundreds of millions. Then when these contracts are rebid as small business set asides, they go to the same ANC company who originally was awarded the contract. This is how they meet their small business goals or come close to meeting them. The practice of sole sourcing large contracts to "so call 8(a) ANC firms" should stop. The law should be changed making ANC companies no different then any other 8(a) company. When their certification period ends, so does their 8(a) certifications-no more establishing other companies as "8(a)".
This begs another question, if an ANC company that has graduated sets up another 8(a) company, how is it possible they can transfer all the past experience from another company to the new one? And why does the government accept that experience?

Wed, Oct 27, 2010

This is not an isolated instance by any stretch. There are countless firms in this area that are playing a "shell game." The government should look at every entity of a company that it does businss with and its ownership structure and ask where the revenue being generated is coming from and why it not being tracked in Deltek

Wed, Oct 27, 2010

As a new 8a SDB who is trying to make it in the Federal World who has gotten only $14,000 worth of work after 8 months of marketing. I was disgusted at a "Med Event" when I saw the President of a ANC "sucking" up to a Dept. of Commerce official and running to buy his liquor (twice). The ANC abuse the intent of the 8a SDB program. There needs to be a rule that Alaskan Natives run these FIRMS not unlike the rest of us... It is all about SPECIAL INTEREST.

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